Trump's tariff deal with China to benefit farmers

China and the US have agreed to hold off on implementing the next wave of tariffs that had been set for January 1, in order to discuss and negotiate future commercial relations. US President Donald Trump said that there would be no additional tariffs on goods from China, while Chinese leader Xi Jinping promised bigger purchases of products from the US. If negotiations fail, Trump says he will impose the tariff increase.

"President Xi and I have a very strong and personal relationship".

However, the statement said that if at the end of this period of time the parties are unable to reach an agreement, the 10% tariffs that the United States has implemented will be raised to 25%.

"Maybe we're not going to get as dovish a Fed as some think", said Joseph LaVorgna, chief economist, Americas at Natixis in NY. "It hasn't been signed and sealed and delivered yet".

"Historically there is a good correlation between the yield curve inverting and the timing of the next recession and the bond market has been a big focus for today", said Binky Chadha, chief strategist at Deutsche Bank in NY. But stocks gave up a chunk of those gains on Tuesday as the details of any agreement remained unclear. Trump himself warned he would revert to tariffs if the two sides could not resolve their differences. Instead, the White House and Beijing offered separate interpretations of the talks. President Trump even reminded his Twitter followers Tuesday morning: "I am a Tariff Man".

Xi Jinping
Xi Jinping

The president tweets on Tuesday added to the uncertainty, as he hinted at the possibility of extending a tariff truce.

"The negotiations with China have already started".

The talks would focus on "whether or not a REAL deal with China is actually possible", Trump said. "Small rays of light create tactical opportunities for investors", he said, while warning "we anticipate that things are still likely to get worse before they get better", pointing out that trade tensions would continue to keep the market volatile. "China has agreed to start purchasing agricultural product from our farmers immediately". This means that the U.S. will not raise the 10% tariff rate on $200 billion worth of Chinese goods to 25% on January 1, as originally scheduled.

China's government isn't yet able to formulate its response to the summit on trade with Trump as senior officials are still out of the country with Xi, according to three officials who were briefed but declined to be named as the matter isn't public.

Larry Kudlow, director of the White House National Economic Council, told reporters that electric vehicle subsidies "will all end in the near future", adding 2020 or 2021 when asked for a timeline.

Vanessa Coleman